Fee War (7)
The Jerome Carrier Tonight Show.
Usually shortened to the Jerome Show, it was the most popular program in the United States.
This live talk show drew not only celebrities but politicians, financiers, startup CEOs, and people from every other corner of public life, and its average audience topped five million viewers.
To the sound of the opening music, the famous comedian and host Jerome Carrier walked onto the set to a roar of applause from the studio audience.
“Good evening, everyone. Jerome Carrier here. Lately I’ve been having a blast playing Nightlight, hurling paint balls at my friend’s head. Then, oh my God! It vanished from the Enstore and the Play Market overnight. I was frantically searching for Nightlight when my daughter suddenly yelled from the side, ‘Dad! The block town is gone!’ We’ve been wandering around looking for those two games ever since.”
The audience burst into laughter.
“So tonight, I’ve invited someone who might know where those games have gone. Please give a big hand to the CEO of Legend Games, Tom Scott.”
The audience applauded in unison as Tom Scott stepped out onto the stage.
The two men exchanged greetings, took their seats, and settled into the conversation.
“Let’s start with the obvious question. Where did Nightlight and Block Valley go? I couldn’t find them anywhere.”
“Well, shouldn’t you be asking Guble and Enple about that instead?”
“I already reached out to Enple and asked them to have CEO Tim Keaton appear on the show, but since they never replied, it seems he has no intention of coming. I’m sure you know why, Scott.”
“And why would that be?”
“Because he doesn’t want to look at the face of someone who shares his name.”
“Hahaha!”
Tom Scott laughed, and the audience laughed with him.
“You’ve filed a lawsuit against Enple, is that right?”
“That’s right.”
“A lawsuit for the ages. Though, of course, Enple will win.”
“Ah! I don’t think so.”
“Really? Everyone here seems to think otherwise. Fine, then. Since you’re about to head into court, why don’t you explain here and now why you think you can win? I’ll play the part of the absent CEO Tim Keaton. From this point on, pretend I’m Tim Keaton. Oh! And no, that does not mean you’re allowed to hit me.”
Laughter rippled through the audience once again.
Tom Scott nodded.
“All right. Let’s do it.”
Jerome went straight into the debate.
“You’ve argued that Enple and Guble are monopolies. But that’s only true if you look at the mobile game market. Across the entire gaming market, Enple and Guble account for only 60 percent.”
“Only 60 percent?”
“Isn’t that better than 95 percent if you limit it to mobile games?”
Tom Scott answered with a smile.
“That’s nothing more than Enple’s wordplay. Take AMZ, for example. Its share of e-commerce is 40 percent. But if you look at the entire retail market, including brick-and-mortar stores, it’s only 8 percent. Expand that worldwide and it drops below 3 percent. The heart of this lawsuit is in-app payments. So it makes perfect sense to define the market as the mobile market.”
“Fair enough. Then let’s talk about the fee. You’re saying 30 percent is too high?”
“Yes. How many mobile game developers even have operating margins above 30 percent? If a game that took years to build flops, the company takes a huge hit. Plenty of them go under. But Enple and Guble suffer nothing at all. If the game succeeds, on the other hand, they take the biggest cut of all. Is it really normal for the fee to exceed the revenue earned by actually making the game?”
Jerome pushed back at once.
“In Nightlight’s case, I’m told most of the revenue comes from consoles. Sonyu’s PlayStation and NS’s ZBox also charge the same 30 percent fee. Isn’t it a little strange to say the 30 percent Enple charges is unfair?”
Tom Scott waved a hand dismissively.
“The cases are different. Sonyu and NS are companies that actually build consoles and sell them at affordable prices, creating a console gaming market in the first place. They also support developers so they can make games suited to their consoles, and they even invest directly in some studios. If a game fails, Sonyu and NS take losses too. And their fee isn’t fixed at 30 percent; it varies depending on the contract terms. What exactly has Enple ever done for the gaming industry? All they do is collect tolls.”
“According to Enple, the regulations and screening on Enstore preserve the value of NOS by ensuring high-quality apps. Isn’t that the argument?”
“Nonsense. On PCs, you can download and install software however you like. The same is true for the computers Enple makes. But on the NOS smartphone OS, you’re supposed to install apps only through Enstore? The funny thing is that in China, they allow the UChat app’s built-in store and UPay payments inside WeChant.”
“Couldn’t that just be a special case for the Chinese market?”
Tom Scott snorted.
“A special case, huh... To me, that sounds like they’re saying, ‘If we’re going to get hit with an antitrust suit in China, we’ll make an exception because we’d probably lose there, but in other countries we can win easily enough, so we won’t bother.’”
“So you’re saying Enple says one thing and does another?”
“Yes. They say they’re protecting customer data by blocking Facenote’s data collection, while at the same time they’re indiscriminately gathering user information and using it for their own services. And in China, they’ve built separate data centers and allow the Chinese government to censor the data. Why do they allow their own store and payments for Chinese apps, but not for American apps? The reason is simple. In China, they have to do it that way to make money. In America, they can still make money without doing it. That’s what fairness means to Enple.”
“Still, aren’t they charging everyone a fair 30 percent across the board?”
“Enple Music, Enple TV, and Bazaar—do they pay the fee?”
Jerome shook his head.
“Of course not.”
“Why not?”
“Because they’re apps Enple made themselves.”
“Exactly. So if Enple Music and Enple TV, both made by Enple, don’t have to pay a fee, while competitors like Spotifyty and NetPlay do, is that really fair competition? And it isn’t just the fee. Enple monopolizes the entire process, from app review to distribution to payments, and acts like a bully.”
“Is that really true?”
“Spotifyty, the world’s largest music streaming app, has suffered all kinds of damage from delayed update reviews and more. Enple Music, on the other hand, gets updated right on schedule. GameFirst was held up from listing on Enstore because they insisted every game inside the app had to be reviewed individually. Yet NetPlay, which operates on a subscription model too, doesn’t have each piece of in-app content reviewed separately.”
“So Enple is using app review as a pretext to sabotage its competitors to suit its own tastes?”
Tom Scott gave an outright sneer.
“The funniest part is that they think GameFirst is Bazaar’s competitor. No one in this industry sees it that way. I’m sure CEO Satya Shyamalan of NS and President Jim Spence were laughing their heads off too.”
“Now that you put it that way, there does seem to be an unfair side to it. But aside from your own apps, everything else still gets charged the same 30 percent, doesn’t it?”
“That’s a blatant lie.”
“A lie? About what?”
“About claiming the same 30 percent fee applies to every company. Enple has quietly cut the fee in half for major players like AMZ and signed separate deals with them. That’s what Enple does: it takes 30 percent from the weak, and 15 percent or less from the strong.”
Because it was the first time he’d heard of this, Jerome looked visibly startled.
“Really?”
“Yes. We’ve already filed a request for disclosure with the court and asked for the contract between the two companies to be made public. But Enple will never release the documents.”
“If they do release them, and it turns out the fee really is 30 percent, what will you do?”
In truth, Tom Scott didn’t know whether that was true or not either.
But Chairman Han Miru said it was solid information.
He didn’t know what the evidence was, but that man’s words could be trusted without question.
Tom Scott answered with confidence.
“Then we’ll withdraw the lawsuit, run an apology ad about Enple, and faithfully go along with whatever they decide from then on—even if Enple raises the fee to 40 percent or 50 percent.”
Jerome seemed ready to wrap things up.
“Thank you for sharing your thoughts today. Of course, this has only been one Tom’s side of the story, so I’d love to hear the other Tom’s side as well. Come on anytime. Any final words?”
Tom Scott thought for a moment, then said, “In the past, Enple was an innovator and a revolutionary force. They changed the world with Enple computers and Enphones. I still feel my heart race when I think back to the first time the Enphone appeared. They fought the telecom carriers that abused their monopoly power, and they cut the fee to 30 percent. But... Enple, which once fought to break monopolies, has now become a monopoly itself. The 30 percent fee has become an unchanging rule, eternal as a golden law. Last year alone, Enple made twenty-five billion dollars through Enstore. Even if that number grows tenfold or a hundredfold in the years ahead, that 30 percent fee will never change.”
Tom Scott paused, then looked into the camera.
“Legend Games is fighting the same fight Enple once fought: trying to break a monopoly. If we just sit still, nothing will change. Please stand with us.”
The lawyers from Enple’s legal team and the Gibson & Simpson firm drafted a strategy to crush Legend Games’ argument.
“To avoid the issue of a mobile game monopoly, we’ll ask the court to include handheld systems like the Rintendo Portable as mobile games too.”
“I think it would be better to expand the scope to the entire software market. Enstore has a 60 percent share of mobile ESD, but if we broaden that to all ESD, we can push the share down to 10 percent.”
“We should also emphasize that Sonyu’s and NS’s console ESD services also charge game companies a 30 percent fee.”
But...
The trial hadn’t even begun yet, and CEO Tom Scott was already appearing on talk shows and interviews as if he knew exactly what Enple would argue, batting each point down in advance.
Even those lawyers who were said to be the best in the business had no choice but to watch their arguments get knocked down one by one on television.
What was more, every document Legend Games had requested and every witness it had petitioned for struck precisely at Enple’s weak points.
That was impossible unless someone had a perfect read on how the lawsuit was likely to unfold.
When Vice President Johnny Myren saw Tom Scott’s interview, he flew into a rage and shouted, “Who leaked the information?”
The Gibson lawyer looked flustered. “What are you talking about?”
“Then how the hell do those bastards know our strategy?!”
“Th-that...”
CAF filed a complaint with the EU, arguing that Enstore’s terms might violate European competition law.
The European Commission sent a written questionnaire asking whether Enple was abusing its dominant position in the mobile market.
The lawsuit that had started in the United States was now spreading into Europe.
I received a call from David.
“I knew the EU was famous for moving slowly, but I never expected them to act this fast.”
The reason was simple: most countries felt the seriousness of Enple and Guble’s monopoly over the mobile market.
Enple and Guble were American companies, but they did business all over the world.
No matter where someone paid, thirty percent of the transaction went straight into an American company’s pocket.
What country would possibly like that?
“In other words, I was ready to cry, and they handed me a slap instead.”
But no matter how fast they move, it’ll still take at least a year to get a ruling.
I smiled.
“Doesn’t matter. We never intended to solve this through a lawsuit from the beginning anyway.”